Northern Oil and Gas, Inc. Announces Third Quarter Earnings, 45% Increase in Record Production Volumes and Provides Operations Update
WAYZATA, Minn., Nov. 8, 2010 /PRNewswire-FirstCall/ -- Northern Oil and Gas, Inc. (NYSE/Amex: NOG) ("Northern Oil") today announced record quarterly production volumes, as well as record quarterly revenues and operating income, excluding the impact of unrealized hedging losses.
THIRD QUARTER 2010 RESULTS
Northern Oil's production volumes for the third quarter of 2010 were a quarterly record of 250,129 barrels of oil equivalent ("BOE"), representing a 45% increase compared to the second quarter of 2010 and a 182% increase compared to the third quarter of 2009. These results exceeded previous guidance of a 30% to 35% quarter-over-quarter production increase and represents Northern Oil's eleventh consecutive quarterly increase in production.
Third quarter 2010 production consisted of 96% crude oil and approximately 4% associated natural gas. Northern Oil exited the third quarter of 2010 with production volumes of approximately 3,406 BOE per day. During the third quarter of 2010, production was added from approximately 5.75 net wells. Northern Oil has maintained a 100% drilling success rate in the Williston Basin Bakken and Three Forks trends since the company's inception.
Revenues from the sale of crude oil and natural gas, including hedge settlements, for the third quarter of 2010 were $16,317,530, which represents a 36% increase compared to the second quarter of 2010 and a 236% increase compared to the third quarter of 2009.
During the third quarter of 2010, Northern Oil's average realized price for crude oil was $69.64 per barrel, which included a $3.22 per barrel gain due to the settlement of crude oil derivative contracts. This compares to an average $70.98 per barrel realized price in the second quarter of 2010, which included a $1.83 per barrel gain due to the settlement of crude oil derivative contracts, and an average $58.44 per barrel realized price in the third quarter of 2009, which included a $3.38 per barrel loss due to the settlement of crude oil derivative contracts.
Northern Oil's reported production expenses for the third quarter of 2010 were $1,084,769, or $4.19 per BOE, on an accrued basis, compared to $561,427, or $3.30 per BOE, in the second quarter of 2010 and $236,362, or $2.45 per BOE, in the third quarter of 2009. The higher production expense is a result of more mature wells utilizing artificial lift and a general aging of Northern Oil's production.
Depletion expense for the third quarter of 2010 was $3,767,712, or $15.06 per BOE, compared to $2,600,836, or $15.06 per BOE, for the second quarter of 2010 and $935,804, or $10.56 per BOE, for the third quarter of 2009.
General and Administrative (G&A) expenses, net of share based compensation, for the third quarter of 2010 were $899,661, compared to $718,471 in the second quarter 2010.
Northern Oil's net income was $987,226, or $0.02 per diluted share for the third quarter of 2010. Northern Oil's net income, excluding unrealized mark-to-market hedging losses, was $4,961,803, or $0.10 per diluted share, for the third quarter of 2010, which represents a 42% increase over net income, excluding unrealized mark-to-market hedging losses, of $3,502,667, or $0.07 per diluted share, for the second quarter of 2010.
Northern Oil defines Adjusted EBITDA as net income before (i) interest expense, (ii) income taxes, (iii) depreciation, depletion and amortization, (iv) accretion of abandonment liability, (v) pre-tax unrealized gain and losses on commodity risk and (vii) non-cash expenses relating to share based payments recognized under ASC Topic 718. Northern Oil's Adjusted EBITDA for the third quarter of 2010 was $12,772,433, or $0.24 per diluted share, which represents a 32% increase over Adjusted EBITDA of $9,677,386, or $0.19 per diluted share, for the second quarter of 2010.
Net income excluding unrealized mark-to-market hedging gains and Adjusted EBITDA are non-GAAP measures. A reconciliation of these measures to GAAP is included in our accompanying financial tables found later in this release. Northern Oil's management believes the use of non-GAAP financial measures provides useful information to investors to gain an overall understanding of current financial performance. Specifically, management believes the non-GAAP results included herein provide useful information to both management and investors by excluding certain expenses and unrealized commodity gains and losses that management believes are not indicative of Northern Oil's core operating results. In addition, these non-GAAP financial measures are used by Northern Oil's management for budgeting and forecasting as well as subsequently measuring Northern Oil's performance, and management believes that Northern Oil is providing investors with financial measures that most closely align to its internal measurement processes.
Northern Oil's capital expenditures relating to exploration and development activities approximated $103 million for the nine months ending September 30, 2010 and are expected to approximate $132 million for the entire 2010 fiscal year based on wells currently drilling and expected to spud by 2010 year-end.
OPERATIONS UPDATE AND INCREASED PRODUCTION GUIDANCE
As of November 5, 2010, Northern Oil is participating in the drilling or completion of 91 gross Bakken or Three Forks wells, for an aggregate of 10.72 net wells drilling, awaiting completion or completing. Of those wells, 5.05 net wells are drilling but have not reached total depth, an additional 4.99 net wells have been drilled to total depth and are awaiting completion and the remaining 0.68 net wells are undergoing fracture stimulation to commence production.
As of November 5, 2010, Northern Oil has spud approximately 23.68 net wells during 2010. Management now expects to spud approximately 25 net wells throughout 2010, up from previous guidance of 24 net wells, and expects to increase production volumes further by 30 to 35% in the fourth quarter of 2010 compared to the third quarter of 2010.
RECENT COMPLETION HIGHLIGHTS
The following table illustrates the most recent well completions with updated longer-term rates in which Northern Oil participated with a working interest ("WI").
DAYS USED TO
COMPUTE AVG. AVG.
WELL NAME OPERATOR COUNTY/STATE WI IP/BOEPD* BOEPD BOEPD***
MOUNTRAIL,
GOBLIN #1-26H SLAWSON ND 45.54% 1,338 N/A N/A
ALAMO MOUNTRAIL,
#1-19-18H SLAWSON ND 29.98% 1,625** N/A N/A
MOUNTRAIL,
BADGER #1-9H SLAWSON ND 28.38% 2,057** 30 799**
DIAMONBACK MOUNTRAIL,
#1-21H SLAWSON ND 25.23% 2,013 30 494**
REVOLVER MOUNTRAIL,
#1-35H SLAWSON ND 24.58% 1,946 N/A N/A
STALLION MOUNTRAIL,
#1-1-12H SLAWSON ND 22.41% 2,753 200 720
RENEGADE ROOSEVELT,
#1-10H SLAWSON MT 22.07% 662 N/A N/A
SNIPER FEDERAL MOUNTRAIL,
#1-6-7H SLAWSON ND 21.41% 3,784 150 930
STATE 36-1 #2H
TFS BRIGHAM WILLIAMS, ND 20.36% 2,356 7 1,438
AMANDA #21-14H CONOCO MCKENZIE, ND 18.75% 1,833** 30 562**
ARMADA MOUNTRAIL,
#1-14-13H SLAWSON ND 14.20% 1,460 N/A N/A
MOUNTRAIL,
NEPTUNE #1-15H SLAWSON ND 13.37% 2,578** 30 749**
BANKS #5892 MOUNTRAIL,
44-34H OASIS ND 13.13% 949 N/A NA
HOIBY MOUNTRAIL,
159-94-4B-3-1H PETRO-HUNT ND 12.81% 831 N/A N/A
GUSTAFSON
29-32-161-92H SAMSON BURKE, ND 12.50% 694 N/A N/A
MCGAHAN MOUNTRAIL,
#1-18-7H HUNT OIL ND 8.56% 697** N/A N/A
ABELMANN 23-14
#1H BRIGHAM MCKENZIE, ND 8.02% 4,169 N/A N/A
KJORSTAD #5300
24-22H OASIS WILLIAMS, ND 6.46% 2,713** 15 1,115**
DOMASKIN MOUNTRAIL,
#19-30-29H FIDELITY ND 1.94% 2,731** N/A N/A
CLIFFORD BAKKE MOUNTRAIL,
26-35 #1H BRIGHAM ND 1.04% 5,061 7 3,657
* Initial production rate (the "IP" rate) is the 24-hour "Peak Production
Rate." Peak Production Rates may be established following the initial day of
production, depending on operator design or well flowback profiles. The IP
rate may be estimated based on other third party estimates or limited data
available at this time.
** The initial BOE production per day ("IP/BOEPD") for each well, the days
used to compute the average BOE per day ("AVG. BOEPD") and the average BOE
produced per day ("AVG. BOEPD") during such computation periods IP/BOEPD and
AVG. BOEPD rates for these wells include only crude oil production because
associated natural gas production was not available.
*** Average barrels of oil equivalents per day ("AVG. BOEPD") exclude any
days a well was down for work/maintenance. All information in the foregoing
table was obtained through operator drilling reports, operator daily
production reports and certain Oil & Gas Division reports publicly available
through North Dakota Industrial Commission.
ACREAGE ACQUISITIONS AND PRODUCTION PROJECTIONS
Year-to-date through September 30, 2010, Northern Oil has acquired approximately 38,864 net acres for an aggregate price of $42.2 million, or an average price of $1,086 per acre. Northern Oil expects to continue to opportunistically acquire acreage throughout the remainder of 2010 and 2011. Based on 2010 and anticipated 2011 activity and assuming drilling activity within the Williston Basin continues at its current pace, We expect to average approximately 6,500 BOE per day in production for 2011.
MANAGEMENT COMMENT
Michael Reger, Northern Oil's Chief Executive Officer, commented, "The third quarter was our best ever in terms of production volumes, Adjusted EBITDA, and key acreage acquisition. The value of our non-operated franchise is best illustrated by the fact that 80% of the acreage we acquired in the third quarter has already been drilled or is currently drilling. We believe we are well positioned to remain focused on the best areas of this rapidly advancing play and turn our acreage to production quickly and efficiently. We look forward to further success in 2011 as we continue to gain critical mass and participate with the many skilled operators driving technology and growth in this premier oil play."
THIRD QUARTER EARNINGS RELEASE TELECONFERENCE CALL
In conjunction with Northern Oil's release of its financial and operating results, investors, analysts and other interested parties are invited to listen to a conference call with management on Monday, November 8, 2010 at 10:00 a.m. Central Standard Time. Details for the conference call are as follows:
Dial-In Number: (866) 837-9779 (US/Canada) and (703) 639-1417 (International) Conference ID: 1490994, Northern Oil and Gas Third Quarter Earnings Release
ABOUT NORTHERN OIL AND GAS
Northern Oil and Gas, Inc. is an exploration and production company based in Wayzata, Minnesota. Northern Oil's core area of focus is the Williston Basin Bakken and Three Forks trend in North Dakota and Montana.
More information about Northern Oil and Gas, Inc. can be found at www.NorthernOil.com.
SAFE HARBOR
This press release contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933 (the "Securities Act") and the Securities Exchange Act of 1934 (the "Exchange Act"). All statements other than statements of historical facts included in this report regarding our financial position, business strategy, plans and objectives of management for future operations, industry conditions, and indebtedness covenant compliance are forward-looking statements. When used in this report, forward-looking statements are generally accompanied by terms or phrases such as "estimate," "project," "predict," "believe," "expect," "anticipate," "target," "plan," "intend," "seek," "goal," "will," "should," "may" or other words and similar expressions that convey the uncertainty of future events or outcomes. Items contemplating or making assumptions about, actual or potential future sales, market size, collaborations, and trends or operating results also constitute such forward-looking statements.
Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our Company's control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following: oil and gas prices, our ability to raise capital, general economic or industry conditions nationally and/or in the communities in which our Company conducts business, changes in the interest rate environment, legislation or regulatory requirements, conditions of the securities markets, our ability to raise capital, changes in accounting principles, policies or guidelines, financial or political instability, acts of war or terrorism, other economic, competitive, governmental, regulatory and technical factors affecting our Company's operations, products, services and prices.
We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control.
CONTACT: Investor Relations Erik Nerhus 952-476-9800
NORTHERN OIL AND GAS, INC.
CONDENSED BALANCE SHEETS
SEPTEMBER 30, 2010 AND DECEMBER 31, 2009
ASSETS
September 30,
2010 December 31,
(UNAUDITED) 2009
CURRENT ASSETS
Cash and Cash Equivalents $ 39,486,949 $ 6,233,372
Trade Receivables 17,841,344 7,025,011
Prepaid Drilling Costs 7,052,815 1,454,034
Prepaid Expenses 417,913 143,606
Other Current Assets 303,848 201,314
Short - Term Investments - 24,903,476
Deferred Tax Asset 863,000 2,057,000
Total Current Assets 65,965,869 42,017,813
PROPERTY AND EQUIPMENT
Oil and Natural Gas Properties,
Full Cost Method (including
unevaluated costs of
$105,415,622 at 9/30/2010
and $53,862,529 at 12/31/2009) 205,430,775 96,801,626
Other Property and Equipment 2,395,743 439,656
Total Property and Equipment 207,826,518 97,241,282
Less - Accumulated Depreciation and Depletion 13,454,548 5,091,198
Total Property and Equipment, Net 194,371,970 92,150,084
DEBT ISSUANCE COSTS 1,446,521 1,427,071
Total Assets $ 261,784,360 $ 135,594,968
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 15,086,298 $ 6,419,534
Line of Credit - 834,492
Accrued Expenses 2,358,824 316,977
Derivative Liability 2,105,190 1,320,679
Other Liabilities 18,574 18,574
Total Current Liabilities 19,568,886 8,910,256
LONG-TERM LIABILITIES
Revolving Credit Facility - -
Derivative Liability 3,051,982 1,459,374
Subordinated Notes 400,000 500,000
Other Noncurrent Liabilities 410,316 243,888
Total Long-Term Liabilities 3,862,298 2,203,262
DEFERRED TAX LIABILITY 5,931,000 922,000
Total Liabilities 29,362,184 12,035,518
STOCKHOLDERS' EQUITY
Common Stock, Par Value $.001; 100,000,000
Authorized, 51,596,849
Outstanding (2009 – 43,911,044 Shares
Outstanding) 51,597 43,912
Additional Paid-In Capital 223,847,529 124,884,266
Retained Earnings 9,509,614 841,892
Accumulated Other Comprehensive Income (Loss) (986,564) (2,210,620)
Total Stockholders' Equity 232,422,176 123,559,450
Total Liabilities and Stockholders' Equity $ 261,784,360 $ 135,594,968
NORTHERN OIL AND GAS, INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
2010 2009 2010 2009
REVENUES
Oil and Gas Sales $ 15,541,520 $ 5,146,972 $ 35,575,240 $ 8,206,202
Gain (Loss) on Settled
Derivatives 776,010 (291,000) 902,946 (416,878)
Mark-to-Market of
Derivative Instruments (6,449,577) - (3,189,194) -
Other Revenue 15,868 - 48,116 -
9,883,821 4,855,972 33,337,108 7,789,324
OPERATING EXPENSES
Production Expenses 1,084,769 236,362 1,978,526 450,502
Production Taxes 1,604,608 437,048 3,274,751 684,763
General and
Administrative Expense 1,624,071 896,877 5,242,582 2,020,828
Depletion of Oil and Gas
Properties 3,767,712 935,804 8,252,153 1,786,130
Depreciation and
Amortization 60,300 22,918 111,197 68,374
Accretion of Discount on
Asset Retirement
Obligations 18,025 1,306 30,777 4,777
Total Expenses 8,159,485 2,530,315 18,889,986 5,015,374
INCOME FROM OPERATIONS 1,724,336 2,325,657 14,447,122 2,773,950
OTHER (EXPENSE) INCOME (117,110) 321,589 (349,400) 138,819
INCOME BEFORE INCOME
TAXES 1,607,226 2,647,246 14,097,722 2,912,769
INCOME TAX PROVISION 620,000 1,059,000 5,430,000 1,165,000
NET INCOME $ 987,226 $ 1,588,246 $ 8,667,722 $ 1,747,769
Net Income Per Common
Share - Basic $ 0.02 $ 0.04 $ 0.18 $ 0.05
Net Income Per Common
Share - Diluted $ 0.02 $ 0.04 $ 0.18 $ 0.05
Weighted Average Shares
Outstanding – Basic 51,519,732 36,769,195 48,544,749 35,201,124
Weighted Average Shares
Outstanding - Diluted 52,145,181 36,941,573 49,127,706 35,312,834
NORTHERN OIL AND GAS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
(UNAUDITED)
Nine Months Ended
September 30,
2010 2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 8,667,722 $ 1,747,769
Adjustments to Reconcile Net Income to Net Cash
Provided by
Operating Activities:
Depletion of Oil and Gas Properties 8,252,153 1,786,130
Depreciation and Amortization 111,197 68,374
Amortization of Debt Issuance Costs 366,729 312,386
Accretion of Discount on Asset Retirement
Obligations 30,777 4,777
Income Tax Provision 5,430,000 1,165,000
Loss on Sale of Available for Sale Securities 197,556 -
Market Value adjustment of Derivative Instruments 3,189,194 -
Amortization of Deferred Rent (13,930) (13,930)
Share - Based Compensation Expense 2,730,779 324,048
Changes in Working Capital and Other Items:
Increase in Trade Receivables (10,816,333) (3,960,249)
Increase in Prepaid Expenses (274,307) (26,623)
Increase in Other Current Assets (102,534) -
Increase in Accounts Payable 8,666,764 2,952,237
Decrease in Accrued Expenses (123,153) (17,418)
Net Cash Provided By Operating Activities 26,312,614 4,342,501
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of Other Equipment and Furniture (1,956,087) (14,450)
Increase in Prepaid Drilling Costs (5,598,781) (662)
Proceeds from Sale of Oil and Gas Properties 237,877 -
Proceeds from Sale of Available for Sale Securities 25,890,901 800,000
Increase in Oil and Gas Properties (92,812,276) (25,804,442)
Net Cash Used For Investing Activities (74,238,366) (25,019,554)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on Line of Credit (834,492) (812,323)
Advances on Revolving Credit Facility 5,300,000 26,000,000
Payments on Revolving Credit Facility (5,300,000) (17,000,000)
Increase (Decrease) in Subordinated Notes, net (100,000) 500,000
Debt Issuance Costs Paid (386,179) (1,190,061)
Proceeds from Issuance of Common Stock - Net of
Issuance Costs 82,500,000 12,686,763
Net Cash Provided by Financing Activities 81,179,329 20,184,379
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 33,253,577 (492,674)
CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD 6,233,372 780,716
CASH AND CASH EQUIVALENTS – END OF PERIOD $ 39,486,949 $ 288,042
Supplemental Disclosure of Cash Flow Information
Cash Paid During the Period for Interest $ 169,232 $ 472,116
Cash Paid During the Period for Income Taxes $ - $ -
Non-Cash Financing and Investing Activities:
Purchase of Oil and Gas Properties through
Issuance of Common Stock $ 12,679,422 $ 224,879
Payment of Compensation through Issuance of Common
Stock $ 5,956,526 $ 324,048
Capitalized Asset Retirement Obligations $ 151,009 $ 104,396
Fair Value of Warrants Issued for Debt Issuance
Costs $ - $ 221,153
Payment of Debt Issuance Costs through Issuance of
Common Stock $ - $ 475,200
USE OF NON GAAP FINANCIAL MEASURES
Northern Oil and Gas, Inc.
Reconciliation of GAAP Net Income to Adjusted EBITDA
Three Months Ended
September 30, June 30,
2010 2010
Net Income $ 987,226 $ 6,120,866
Add Back:
Income Tax Provision 620,000 3,833,000
Depreciation, Depletion, Amortization, and
Accretion 3,931,999 2,766,688
Share Based Compensation 724,410 1,193,072
Mark-to-Market of Derivative Instruments 6,449,577 (4,251,199)
Interest Expense 59,221 14,959
Adjusted EBITDA $ 12,772,433 $ 9,677,386
Adjusted EBITDA Per Common Share - Basic $ 0.25 $ 0.19
Adjusted EBITDA Per Common Share - Diluted $ 0.24 $ 0.19
Weighted Average Shares Outstanding –
Basic 51,519,732 49,934,409
Weighted Average Shares Outstanding -
Diluted 52,145,181 50,609,944
Northern Oil and Gas, Inc.
Reconciliation of GAAP Net Income to Net Income Excluding
Unrealized Mark-to-Market Hedging Losses
Three Months Ended
September 30, June 30,
2010 2010
Net Income $ 987,226 $ 6,120,866
Mark-to-Market of Derivative Instruments 6,449,577 (4,251,199)
Tax Impact (2,475,000) 1,633,000
Net Income without the Effect of Certain Items $ 4,961,803 $ 3,502,667
Net Income Per Common Share – Basic $ 0.10 $ 0.07
Net Income Per Common Share – Diluted $ 0.10 $ 0.07
Weighted Average Shares Outstanding – Basic 51,519,732 49,934,409
Weighted Average Shares Outstanding - Diluted 52,145,181 50,609,944
SOURCE Northern Oil and Gas, Inc.
Released November 8, 2010